Suzano Q1 Earnings Call Highlights

Key Points

• Suzano said its business is insulated by long-term logistics contracts (over 50 vessels, 10 dedicated) and extensive oil and FX hedges, with nearly 90% of 2026 oil exposure hedged (avg. $57–$69) and roughly $5.6 billion of FX hedges to reduce earnings volatility and generate positive cash adjustments at current price levels.
• Operationally, volumes were higher year‑over‑year — Suzano sold 2.84 million tons of pulp (≈200k tons above Q1 2025) — and pulp EBITDA rose to BRL 4.1 billion, though pulp production will be constrained in Q2 by planned maintenance (almost 300k tons lower vs. last year); paper and packaging showed mixed regional demand but should see seasonally stronger Q2 volumes and prices.
• On the balance sheet, net debt was about $13 billion with leverage roughly 3.3x; management reiterated a priority on deleveraging and reducing net debt, said buybacks are “always an alternative,” and is studying non‑core divestitures while issuing long‑dated instruments post‑quarter.

Suzano NYSE: SUZ executives highlighted logistics protections, hedging positions and cost discipline as key pillars of resilience during the company’s first-quarter 2026 earnings call, while also pointing to improving price trends in pulp and a seasonally stronger second quarter for paper and packaging operations.

Management points to logistics and hedges as buffers

CEO João Alberto Fernandez de Abreu said Suzano’s business model “has distinct attributes” that help the company navigate geopolitical volatility. He emphasized long-term international logistics contracts supported by “more than 50 vessels,” including “10 of them fully dedicated to our operations,” which he said helps protect against freight-rate spikes and supports service reliability.

Abreu also cited “inside the fence production of critical inputs” to mitigate supply and cost risk, and said Suzano maintains a hedge portfolio intended to reduce exposure to energy cost pressure tied to international oil prices.

Q1 results: headcount down, cash cost outlook reaffirmed

Discussing first-quarter performance at a high level, Abreu said EBITDA reflected “a solid performance” with volumes above the prior-year quarter, supported by higher pricing and what he described as G&A expenses that “fully offset year-over-year inflation.” He added that Suzano was operating with “10% less headcount when compared with a year ago.”

On costs, Abreu said first-quarter cash production costs were “100% aligned with our operational plan,” and despite geopolitical cost pressures, management still expects average 2026 cash costs to be below 2025 levels based on current visibility.

He also said first-quarter free cash flow reflected specific items including dividend payments, the timing of interest payments, and “a one-off CapEx related to the wood swap with Eldorado last year.” Abreu reiterated that capital allocation priorities remain focused on strengthening the capital structure, with “a clear emphasis on reducing net debt.”

Paper and packaging: mixed demand, cost improvements, Q2 seasonality

Fabio Almeida de Oliveira, EVP of Paper and Packaging, described mixed demand trends across regions. In Brazil, printing and writing demand (per IBÁ) rose 3% in the first two months of the quarter year-over-year, led by coated paper, while international paper markets remained pressured amid weaker demand and excess capacity. Almeida said PPPC data showed demand in mature markets declined about 7%, while Latin America demand grew 5% year-over-year.

In paperboard, Almeida said Brazilian demand rose 6% in the first two months of the quarter versus the same period a year ago. In the U.S., he cited AF&PA data showing SBS shipments and production were broadly stable year-over-year, with operating rates around 82%, while liquid packaging board production fell 20% year-over-year due to softer consumer demand and inventory reductions by converters.

Operationally, Almeida said Brazilian units delivered stable volumes versus Q1 2025, while Suzano Packaging posted lower volumes due to lower demand and liquid packaging board inventory reduction at customers. He added that Suzano Packaging saw sequential price improvements on a dollar basis, while Brazilian operations faced lower export prices and FX impacts, including reduced shipments to the U.S. “prior to the imposition of tariffs.”

At the segment level, Almeida said paper and packaging EBITDA fell 8% year-over-year, mainly due to lower export prices from Brazil and FX appreciation. By contrast, Suzano Packaging EBITDA increased 167% year-over-year, which he attributed to turnaround effects. He highlighted cost improvements in Brazil, with COGS per ton down 8% year-over-year and 6% quarter-over-quarter, driven by lower cash costs and logistics costs.

At Suzano Packaging, Almeida said severe winter storms late in January increased natural gas consumption and prices, with total weather-related costs estimated at about $5 million. Looking ahead, he said Q2 should bring seasonally stronger volumes and prices in both Brazil and the U.S., supported by price increases and contract index pass-throughs in the U.S. He warned, however, that higher raw materials, energy and logistics costs related to conflict in the Middle East could pressure paper producers’ cost structures. Almeida expects Brazilian industrial cash costs to be stable in Q2 versus Q1, while logistics costs could rise with diesel and container rates. He also noted annual maintenance at Suzano Packaging in early May should temporarily raise production costs but is not expected to impact sales.

Pulp: balanced hardwood market, divergent softwood dynamics

Leonardo Grimaldi, Executive Officer of Commercial Pulp and Logistics, said the quarter featured “more balanced market fundamentals,” driven by healthy paper production and supply-side disruptions that reduced short-term availability of hardwood pulp. He cited SEI data showing China paper and board production rose 15% versus Q1 2025, and referenced pulp supply curtailments in Indonesia following forestry license revocations, along with increased clarity that APP’s OKI-2 startup was delayed to year-end—meaning “no new market pulp volume will reach the market in 2026.”

Grimaldi said these factors supported hardwood pulp price increases across markets, with order intake “slightly above our forecast” and continued delivery backlogs, particularly in Asia. Suzano sold 2.84 million tons of pulp in Q1 2026, nearly 200,000 tons above Q1 2025, which he said was consistent with its seasonality-driven sales plan. Pulp production, however, came in below budget due to non-recurring events during maintenance and ramp-up after scheduled downtime, leaving inventories “quite low and flattish like year-end 2025.”

He said Suzano’s logistics structure allowed it to keep supplying customers in regions affected by conflict-related logistics disruption, surpassing “eventual additional war-related surcharges” to maintain continuity.

Grimaldi reported pulp EBITDA of BRL 4.1 billion, up year-over-year on higher volumes, lower costs and better U.S.-dollar prices, but pressured by FX appreciation. Sequentially, EBITDA declined versus the prior quarter despite higher pulp prices in U.S. dollars, due to seasonality, a stronger Brazilian real and heavier maintenance activity.

Looking forward, Grimaldi said demand in Europe and North America exceeded expectations, with paper producers raising operating rates amid reduced competition and more expensive logistics, as well as inventory building across the value chain. In response, he said Suzano announced another round of May price increases targeted to Europe and North America.

He also emphasized an increasingly challenging softwood backdrop, noting a consultant estimate that about 11 million tons—roughly 40% of global softwood capacity—was operating at a loss. He said those dynamics increase the likelihood of commercial downtimes or permanent closures of softwood mills, particularly in the Northern Hemisphere, and may incentivize “de-verticalization” of integrated producers in Western markets.

For Q2, Grimaldi said Suzano’s production would be constrained by planned maintenance at major lines including Três Lagoas 1 and 2, Mucuri Line 2 and Jacareí, as well as lower operating rates at some mills, resulting in an “almost 300,000 tons” production reduction year-over-year. He also said some inventory rebuild would occur in Q2 after the company was unable to rebuild in Q1, though Suzano intends to keep rebuild levels “minimum possible.”

Costs, hedging strategy, and balance sheet priorities

In prepared remarks attributed by the operator, Suzano said first-quarter 2026 cash costs excluding stoppages were BRL 802 per ton, up 3% quarter-over-quarter due to temporary operational factors such as higher auxiliary materials consumption tied to planned shutdown calendars, higher purchased energy costs from a non-recurring mill event, and temporary wood-cost pressure from higher consumption and lower fixed-cost dilution. The company said these were partially offset by lower input prices and a 3% average U.S. dollar depreciation versus the real, reducing local currency costs for items like caustic soda and natural gas.

Suzano said there was no impact from the Middle East conflict on Q1 cash costs, and that costs excluding stoppages fell 7% year-over-year, helped by a 10% average U.S. dollar depreciation versus the real, lower wood costs, lower spending on labor and services, and improved energy sales performance. For Q2, the company said it now anticipates some pressure related to Middle East conflict impacts through energy and input markets, and expects cash costs in the second quarter to rise by low single digits versus Q1.

EVP of Finance and Investor Relations Marcos Assumpção detailed Suzano’s oil and FX hedging positions. He said that while a full pass-through sensitivity would imply each $1 per barrel increase in Brent could reduce EBITDA by BRL 47 million, Suzano’s “current net cash impact” is about BRL 12 million per $1 increase, supported by long-term diesel contracts and an oil hedge portfolio built over the past two years. Assumpção said Suzano is nearly 90% covered for 2026 oil exposure using structures including zero-cost collars, with an average range of $57-$69 per barrel, capping hedge cost at $69 per barrel. He added that if Brent stayed at $104 per barrel (the level at quarter-end), the company would receive BRL 810 million in cash adjustments over the next two years, and said Q1 results already included a BRL 48 million positive cash impact from oil hedges.

Assumpção also highlighted an FX hedge portfolio of $5.6 billion—“more than 60%” of FX exposure—with an average put option of 5.97 and a call option of 6.90. He said if the currency remained at BRL 5.22, Suzano would receive “more than BRL 4 billion” in positive cash adjustments over the coming quarters.

On the balance sheet, Assumpção said net debt increased slightly to $13 billion in the quarter due mainly to dividends, higher CapEx payouts and concentrated interest payments. Leverage remained “relatively stable” at 3.3x in U.S. dollar terms, with average debt maturity of more than six years and average cost of 5%. He also noted that after quarter-end, Suzano issued a CPR of about BRL 2.5 billion with an 11-year term and swapped it into CDI at 96% all-in swapped cost, and issued an additional BRL 180 million in incentivized debentures with a 15-year average maturity.

During Q&A, Abreu said management was “not comfortable with the share price,” adding it was not aligned with what he called the business’s robustness. He said buybacks are “always an alternative” and that the company is analyzing that possibility, while emphasizing continued discipline and stating he did not foresee any inorganic moves that would materially impact cash in the coming years. Assumpção told analysts the company would prefer a lower, more normalized leverage level before changing its dividend policy, though he said there could be room in the future as deleveraging progresses. He also said Suzano is analyzing divestitures of non-core assets, including land plots with higher-value uses.

Abreu also reiterated progress on Suzano’s joint venture with Kimberly-Clark, saying the company was encouraged by mapped efficiency gains and that closing is estimated for the third quarter of 2026, “a 100% alignment of what we planned.”

About Suzano NYSE: SUZ

Suzano SA is a Brazil-based pulp and paper company recognized as one of the world's leading producers of eucalyptus pulp. The company develops and supplies a wide range of fiber-based products that serve global demand in printing and writing papers, tissue paper, packaging, and specialty paper markets. With an extensive network of industrial units and logistics operations, Suzano manages every stage of production from forest plantations to final delivery, emphasizing integrated operations and quality control.

At the core of Suzano's business is its sustainable forestry model, which covers more than one million hectares of managed eucalyptus plantations across Brazil.

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